Life after Palisades: Despite extension to keep nuclear plant open until 2022, SW Mich. braces for economic impact

The owner of the Palisades nuclear plant in Covert expects to close the facility in 2022. Economic developers and other local groups have started planning ahead to brace for the closure.Courtesy photo

COVERT — Officials in Van Buren County felt a sense of relief last month when one of its largest employers and sources of tax revenue pledged to stay in the community for four more years.

Entergy Corp.’s Palisades nuclear plant in Covert Township, which produces electricity for Consumers Energy, was up for closure in October 2018. That’s because the two companies said it would have been cheaper for ratepayers to close the plant than to continue the current power purchase agreement, which expires in spring 2022.

The early-closure plan, which was first announced in December 2016, came as a blow particularly for local officials and economic development groups who were sent scrambling for options.

The 800-megawatt plant on the shores of Lake Michigan employs 600 highly skilled workers and contributes about $1 million annually, or roughly 7 percent, in tax revenue to the county. Under the early-closure plan, Entergy and Consumers had pledged $8 million and $2 million, respectively, for a community development fund to lessen the impact.

Although the $10 million has been withdrawn amid a new four-year planning window, local officials are laboring on about what to do post-Palisades. And they’re not alone: Michigan’s largest utilities, Consumers and DTE Energy, are also planning — or have started, as is the case in Muskegon — several coal-plant retirements across the state amid the transition to cleaner energy sources. As power plant retirements occur, companies and state officials have made it a point to be proactive in bracing for the loss of activity and jobs while economic development groups work to find replacements.

“Obviously, we’re very excited the closure is coming at a later date,” said Jill Bland, managing partner at Southwest Michigan First, which has been active in preparing for the Palisades retirement. “It will give us more time to lay out opportunities and next steps for what we need to do toward the 2022 deadline.”

Valerie Brader, executive director of the Michigan Agency for Energy, said late last month that while the extension is good news for plant workers, “that does not mean that local officials can put off making difficult decisions about how to prepare for life without the nuclear plant and the tax dollars it pumps into the local economy.”

While there is vague talk from state and local officials about the need for partnerships, Bland said her group has already been in contact with national site consultants that help corporations find locations to relocate.

“We’ve generated some very good leads,” Bland said. “With the proximity to the Detroit and Chicago markets — and the quality of life here — we have a lot of very positive things in this area.”

At least in the near term, redevelopment will likely take place elsewhere in the area, given the highly regulated decommissioning process for nuclear plants set at the federal level. The Nuclear Regulatory Commission (NRC) oversees that process, as well as what will be done with spent fuel that is currently stored on site. Ultimately, “the disposition of the Palisades plant is entirely at the discretion of Entergy” as part of the deal when the company bought the plant from Consumers in 2007, according to the Michigan Public Service Commission.

“At this point, I’d say we’ll focus on the surrounding areas and what could be made available for future or alternative uses,” Bland said.

SETTING PRIORITIES

While the companies offered $10 million for a development fund and future contributions from the state may possibly become available, questions persist about how the funding could directly lead to more development.

Bland said a list of priorities needs to be developed first, but those dollars could fund infrastructure expansion or upgrades, or similar work on wastewater and water systems in the area. It could also be used to build new roads or buy properties for future development.

“Those are things we might need assistance financially to work on,” she said. “Most communities don’t have a pot of money sitting there to fund major improvements.”

Entergy spokesperson Valary Gent said working with local stakeholders “will always be a responsibility that we take very seriously.”

“We will continue to work with local officials and provide assistance and information as appropriate, to help their transition planning,” Gent said. “We appreciate the community and its leaders who recognize the positive contributions that Palisades makes to the local area, and we look forward to remaining a good partner.”

Consumers spokesperson Katie Carey said in Muskegon and Monroe counties, where the utility has recently closed coal plants, Consumers has “shar(ed) information about potential redevelopment opportunities for those locations, taking part in discussions about how both communities can continue to grow and attract new business development and providing financial support for community redevelopment initiatives.”

Last month, state regulators approved the sale of Consumers’ B.C. Cobb plant in Muskegon and its J.R. Whiting plant in Luna Pier to North Carolina-based Forsite Development. In Muskegon, Forsite wants to use the plant’s location on the east end of Muskegon Lake to enhance shipping at the port.

LOCAL IMPACTS

The potential for development, however, doesn’t immediately solve revenue declines for local governments.

Van Buren County Administrator John Faul said the annual tax revenues from Palisades — which make up “a big part of our operating budget” at about 7 percent — will likely gradually fall off over the years, but it’s uncertain at this point by how much and when.

Some of the early efforts may include revisiting the county’s expenditures, he said, and applying for federal economic development assistance grants, which is “already in the works.”

“A planning grant would allow us to pick the brains of others that have gone through something similar,” he said. “We have to be conservative in what we’re spending our money on and take a close look at what services are mandated, what are required and what are expected. Even though (the closing is) delayed five years, that doesn’t mean we can (maintain spending) for five years.”

While it’s early, Faul said a key to working with state and local economic development agencies will be tapping into the area’s strengths.

“Van Buren County is a little different from our neighbors,” he said. “There’s a big agriculture component here. We’ll focus on what we’re successful at and take advantage of the transportation networks going through the county.”

South Haven City Manager Brian Dissette said the city is in a “somewhat odd” situation. While it won’t be affected by the loss of revenue like the county or township, many of the plant employees live in South Haven, he said.

“We have an estimated 150 folks working in the plant that live in the city. That’s something we’re keenly aware of and are just doing our best to keep an eye on those people and to continue offering them opportunities,” Dissette said.

Gent said Entergy’s local contributions will continue.

“With the plant’s continued operation, Entergy remains the largest taxpayer in Van Buren County and its corporate contributions program will continue to provide hundreds of thousands of dollars every year to many worthy local organizations,” she said. “Palisades also has a strong record of community support through its employees who give generously of their time and money to the area schools and for local causes.”

‘QUITE UNUSUAL’

While economic development planning is in the beginning stages, officials note it’s highly unusual to have years to prepare for the closure of a major employer.

Gent says Entergy “remains focused on and committed to its broader business strategy to exit the merchant power industry and divest its wholesale assets including Palisades.” The Palisades closing comes after a string of similar announcements by the company in Vermont, Massachusetts and New York.

Bland of Southwest Michigan First recalled only one other instance when a company gave long-term notice of a closure, which happened in the early 1990s when General Motors announced it was shuttering a facility in Kalamazoo. The plant ended up closing about seven years later, in 1999.

“It is rare,” she said. “We look at this as a fortunate opportunity. We need to have our focus on becoming a little more diverse with companies in the area.”

Kathy Wagaman, director of the South Haven Area Chamber of Commerce, agrees that the situation is “quite unusual.”

“So many companies make an announcement, and it’s effective the next week,” Wagaman said. “For planning purposes, it’s great to have that extra time, but we don’t have time to not be proactive. It’s critical we get on the stick and look for solutions.”